Industrial Relations And Labour Laws
Ir, Statutory Compliance, Payroll, Recruitments,
Korgaonkar K A
Karthik Nayudu
Regional Manager - Hr
Hr Officer

Thread Started by #Saptarshi

I am working in a Manufacturing Industry (PSU) in West Bengal. My company is covered under ESI Act. However as all our permanent employees gross salary is above Rs. 15000 as our company provides better medical benefit so our permanent employees are not entitling for ESI for last few years, However for Contract workers, we ensure that all have ESI coverage. In recent time I have faced two issues by 2 different contractors on which I require guidance;

1. A contractor to be engaged in plumbing and electrical work. That company/Firm is not covered by ESI (they belong from goa) rather they are covered under Employee's Compensation Act. In such case as getting ESI registration will kill time so they requested to accept Coverage of their workers under Employee'a compensation act instead of or as a substitute of ESI.

2. Another vendor/contractor are providing 4-5 cars alongwith drivers to our company. In such case do this contractor need to register for ESI (no. of worker is below 10) or they may cover those drivers under Employee Compensation Act or may be insure the drivers under Motor Vehicles Act as a substitute of ESI.

Rgds, DG
9th July 2013 From India, Delhi
Dear DG,
Answer to your question 1:
PE is liable to cover all the coverable employees entering in his premises / establishment. Therefore, it is his duty and responsibility to ensure the proper compliance of law. If contractor is not having a code then, the PE should cover the emplyees of such contractor under his code and comply accordingly. Provisions of EC Act will not operate in such case since ESI Act is applicable.
Answer to your question 2:
It is your duty and responsibility to cover the drivers under ESI. You should ensure the proper compliance. Provisions of EC Act will not operate as told above. Motor Vehical insurance is third party insurance and the drivers are not covered. Since ESI Act is applicable to you, no other insurance will substitute your coverable employees.
10th July 2013 From India, Mumbai
Dear DG,
Answer for Question:1
As per Sec.2 of ESIC act, as a Principal Employer you have to cover all employees who comes under ESIC. If the contractor doesn't have ESIC Code, Principal employer should remit the contributions through your code or you can approach ESIC Sub Regional Director / Branch Manager to exempt ESIC for Contract workmen, if in case your contractor is ready to provide better benefits than ESIC.
Answer for Question:2
The answer of question 1 is applicable to second question also.
10th July 2013 From India, Jaipur
Dear K. Ramesh ji,
Your above quote is in addition to my answer. Can you or anybody else tell me:
(i) how many contractors are given such exemption by ESI so far?; and / or
(ii) name a single contractor who is given such exemption?
10th July 2013 From India, Mumbai
In respect of persons engaged at our plant by your Goan based contractor, you have to ensure ESI coverage. Coverage of Employees Compensation Act is not a substitute but it should be read that application of ESI Act is substitute for workmen's compensation/ Employees' Compensation. It is the responsibility of the employer to pay compensation as per WC Act but whereas the ESI Corporation takes up the liability of paying the compensation in respect of those insured employees. As such it is primarily your responsibility to ensure that all those who are below 15000 are covered by ESI notwithstanding whether the employer (contractor) has taken an WC Policy or not.

Second: The provision of taxi or cab service with drivers is not a contract of service but it is a contract FOR service in which the service provider is like a vendor/ seller who sells his service and bills. Therefore, here the relationship between the company and the travel agency is that of buyer and seller and no provision of CLRA Act will be applicable. Hence we need not take care of the drivers' ESI or Workmen's Compensation policy or other. If something happens, it is the travel agency who should take care of whether under MACT or ESI. Being an establishment perhaps the may also come under the purview of ESI Act and the drivers may be covered employees and if so, let them get the benefits from ESI, we don't have an say in it.


10th July 2013 From India, Kannur
@madhu t.k
Sir, the concept of Contract for service and Contract of service is a nit confusing and I need some guidance. Now a days most of the contract given/issued by our company is Job contract/Work contract and hardly any Labour contracts are issues. Please advise that all such job contract is contract for service. Because all such job contract only mentions volume of job and not specifies anything on no. of labour engagement.
10th July 2013 From India, Delhi
If you give contract for doing a particular work and the process involved is carried out outside your factory then it may be a contract for service provided certain other conditions are satisfied. First, the person for whom the product is being processed does not have any control over the workers, over the process involved in it, or on the time schedule the workers should follow etc. He can only inspect the final product or conduct quality checks whenever required. In some cases the material will be purchased by the contractor and the employer can only check whether the material conform to his specifications or not.

At the same time, if job work is given with materials and the workers are doing the process within the factory premises as per directions given by the employer or his persons/ supervisors, then it shall be deemed as a contract of service. Here the workers engaged by the contractors are indirectly employed by the employer and are doing their job as per the factory timings fixed by the employer, taking weekly offs as per weekly closure day fixed by the employer, using the infrastructure like rest rooms, canteen, drinking water etc as provided by the employer and they are carrying out their work using the power supplied by the employer. This is contract of service and the contractor is supplying service of human being which the employer can utilise as per his requirements. In the deep, of course, there are other parameters but all these are just to see whether the contract is sham or not and the underlying principle remains the same, ie, what is the relationship between the two, whether agent principal or servant master.

Not mentioning the exact number of manpower required in the contract is just an attempt to say that the contract is genuine but in practice we should say how many are required and at what rate of wages they should be deployed. That will not make the contract a contract FOR service.

In the case of a tie up with travel agent for engaging drivers with vehicle for the company purpose, it will be total service that is offered and not that we hire a vehicle and we fill fuel and just take the service of a driver from outside. In the latter case, certainly, the contract to supply human resource (driver) is a contract of service and will come under the purview of Contract labour Act.

10th July 2013 From India, Kannur
Dear Madhu ji,
Your response in this thread, I read it very carefully. 
I will not make daring to differ with you Sir. I am aware of your knowledge, your profile and your contribution. But still I feel you should review your below given quotes.
I agree with your following quote, if the contract is contract for service. Also out side work factor plays an important role in this.
I feel MACT will not operate for injury to drivers. 

10th July 2013 From India, Mumbai
Dear All
The Slab for ESIC is going to become Rs.25000/- Gross/Month.
It's pending with parliment as it falls in Quasi, maximum in next 3-4 Months the official announcement will be rolled out.
Chills 'N' Cheers
Karthik Nayudu
11th July 2013 From India, Vijayawada
The Workmen’s Compensation Act, renamed as Employees Compensation Act, was enacted in 1923, probably the first social security legislation. The principal Act provided for payment of compensation to employees who meet with injuries during the course of employment. The Act also provided for payment of compensation to workers contracted by certain occupational diseases. Then it was solely the responsibility of the employer to pay compensation in case of injuries, death while on duty and occupational diseases.

With the passing of Employees State Insurance Act in 1948 and forming of ESI Corporation, the above liability of the employer has been taken over by the ESI Corporation in return for a regular contribution. Along with workmen’s compensation, the ESIC absolved the liability of payment of maternity benefit payable to female employees. All these are based on some conditions, that ESIC will bear the above liabilities only in respect of employees drawing a certain amount of wages and there will be a ceiling to the amount of compensation payable, there should be at least certain amount of contribution paid to the Corporation on behalf of the employee and so on. It is due to this fact that in respect of employees who are not covered by ESI, the responsibility of payment of compensation is still with the employer. Also, in respect of a woman employee covered by ESI but who does not qualify for maternity benefits for want of required number of days’ contribution (70 days in the two contribution periods) the employer is still liable to give maternity benefits following the Maternity Benefits Act. That means it is like an insurer who takes over the liability of another person in return for a consideration called insurance premium and on certain conditions with regard to number of premium paid. Since ESI Act has been made mandatory without which an establishment with a certain number of employees (10 as of now) cannot run, we follow that Act in respect of those who are required to be covered (those who draw salary of not more than Rs 15000, at present) and in order to make funds available to meet the expenses or compensation payable to others who are not under ESI cover, we will make a tie up with other agencies, like LIC with a different terms. Therefore, both these Acts will run simultaneously but the ESI Act is enforced strictly and every employer is expected to follow it without fail.

Since the cab service comes under contract for service, I don’t think that we should look into minute details of the applicability of ESI or other Acts. Regarding MACT, I am not sure if the driver is excluded. If then, we all will be in trouble because most of us are drivers too for our own cars!

11th July 2013 From India, Kannur
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